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Kenneth Lay

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Kenneth Lee "Ken" Lay (April 15, 1942–July 5, 2006), was an American businessman, most notable as the former Chairman and CEO of Enron Corporation. Ken Lay and Enron became synonymous with corporate abuse and accounting fraud following the collapse of Enron in 2001. Lay was the CEO and chairman of the company from 1986 until his resignation on January 23, 2002, except for a few months in 2001 when he was chairman and Jeffrey Skilling was CEO.

File:Ken lay enron.jpg
Kenneth Lay

On July 7, 2004, he was indicted by a grand jury on 11 counts of securities fraud and related charges.[1]. On January 31, 2006, following four and a half years of preparation by government prosecutors, Lay's and Skilling's trial began in Houston. Judge Sim Lake dismissed one charge of securities fraud against Lay on March 26, after the government rested its case. After 56 days of testimony and six days of jury deliberation, Lay was found guilty on May 25, 2006, of all 10 remaining counts against him. The jury convicted Lay of one count of conspiracy, three counts of securities fraud, and two counts of wire fraud; in a separate bench trial, Judge Lake found Lay guilty on three counts of making false statements to banks and one count of bank fraud. Because each count carried a maximum 5- to 10-year sentence, legal experts said Lay could have faced 20 to 30 years in prison.[2] However, he died of a heart attack at his vacation home in Old Snowmass, Colorado, before the arrival of his sentencing date, which had been scheduled for October 2006.[3]

A number of books have been written on Lay and Enron including Conspiracy of Fools (2005), Icarus in the Boardroom, The Smartest Guys in the Room (2003), and 24 Days. The Smartest Guys in the Room was adapted into a documentary film titled Enron: The Smartest Guys in the Room, released in 2005.

Early life and career

Lay was born into a poor family in Tyrone, Missouri. Ken delivered newspapers and mowed lawns to pitch in. His father, Omer, was a Baptist preacher and some-time tractor salesman. He attended the University of Missouri where he found his calling in economics. He has been described by his undergraduate classmates at the University of Missouri-Columbia as industrious and high-minded, and served as president of the Zeta Phi chapter of the Beta Theta Pi fraternity at the University of Missouri and got his doctorate in economics at University of Houston in 1970 and went to work at Exxon Mobil Corp. predecessor Humble Oil & Refining upon graduation.

Lay worked in the early ‘70s as a federal energy regulator. He then became undersecretary for the Department of the Interior before he returned to the business world as an executive at Florida Gas. By the Reagan administration, when energy was deregulated, Lay was already an energy company executive and he took advantage of the new climate by merging Houston Natural Gas Co. with Nebraska-based Inter-North to form Enron in 1985.

Lay was one of America's highest-paid CEOs, earning (for example) a $42.4 million compensation package in 1999.[4] He sold large amounts of his Enron stock in September and October of 2001 as its price fell, while encouraging employees to buy more stock, telling them the company would rebound. Lay liquidated more than $300 million in Enron stock from 1989 to 2001, mostly in stock options.

Lay maintained business and political ties to Republican government officials, hiring (for example) James Baker and Robert Mosbacher as they left the Cabinet of President George H. W. Bush (both men lobbied for Enron contracts in the wake of the First Gulf War). Lay was a supporter of current president George W. Bush for Governor of Texas; in 1999, Bush signed a law deregulating Texas electric markets.[4] Bush carried on an extensive personal correspondence with Lay [5] and Bush is reputed to have given Lay the personal nickname "Kenny Boy". [6] [7]

A Bush Pioneer, Lay became one of the largest individual contributors to the Bush-Cheney 2000 presidential campaign: his donation history shows $651,760 to Republicans, $61,960 to Democrats, and $62,150 to special interests.[8] Lay allowed Bush and Cheney to use his personal Enron jet for transportation during their 2000 election campaign, and served on the Bush-Cheney Transition Advisory Committee. According to Kurt Eichenwald's book Conspiracy of Fools, he was nearly selected to be Secretary of the Treasury following Bush's victory in the 2000 U.S. presidential election. Ultimately Paul O'Neill was chosen for the position instead.

Together with his wife, Linda, Lay had five children and 12 grandchildren.

Indictment and trial

On July 7, 2004, Lay was indicted by a grand jury in Houston, Texas, for his role in Enron's collapse. Lay was charged, in a 65-page indictment, with 11 counts of securities fraud, wire fraud, and making false and misleading statements. The trial commenced on January 30, 2006, in Houston, despite repeated protests from defense attorneys calling for a change of venue on the grounds that that "it was impossible to get a fair trial in Houston – the epicenter of Enron's collapse. Enron's bankruptcy, the biggest in U.S. history when it was filed in December 2001, cost 4,000 employees their jobs and many of them their life savings. Investors lost billions."[2] During his trial, Lay claimed that in 2001 Enron stock made up about 90 percent of his wealth, and that his current net worth (in 2006) was in the negative by $250,000. He insisted that Enron's collapse was due to a "conspiracy" waged by short sellers, rogue executives, and the news media.[9] It was reported that Lay's congenial reputation took a blow as he appeared confrontational and irritable at several points during his testimony. [10] On May 25, 2006, Lay was found guilty on all six counts of conspiracy and fraud by a jury of eight women and four men. In a separate bench trial, Judge Lake ruled Lay was guilty of four counts of fraud and false statements. Sentencing was scheduled to take place on October 23, 2006 at 1 p.m.

Death and abatement of conviction

While vacationing in Colorado on July 5, 2006, Kenneth Lay suffered a massive coronary heart attack. The Pitkin, Colorado, Sheriff’s Department confirmed that officers were called to Lay’s house in Old Snowmass, Colorado, near Aspen at 1:41 AM MDT (3:41 AM EDT). He was taken to Aspen Valley Hospital, where he was pronounced dead at 3:11 AM MDT. According to KHOU-TV, the apparent cause of death was a massive heart attack. [11]

As a result of Lay's death prior to exhausting his appeals, his conviction is abated, and Lay is legally considered never to have been indicted or convicted of criminal charges.[12][13] Civil suits are expected to continue against Lay. However, claimants may not seek punitive damages against a deceased defendent, only compensatory damages [14].

Education

Events timeline

Trivia

  • The Ken Lay YMCA in Cinco Ranch in unincorporated Fort Bend County, Texas was named after Ken Lay. Lay asked for his name to be removed from the YMCA in June 2006. The YMCA is, as of 2006, called the "Katy Family YMCA" after the city of Katy.

See also

References

  1. ^ Crawford, Kristen (2004-7-12). "Lay surrenders to authorities". CNN Money. Retrieved 2006-5-25. {{cite web}}: Check date values in: |accessdate= and |date= (help)
  2. ^ a b Pasha, Shaheen and Jessica Seid (2006-5-25). "Lay and Skilling's day of reckoning". CNN Money. Retrieved 2006-5-25. {{cite web}}: Check date values in: |accessdate= and |date= (help)
  3. ^ "Kenneth Lay dies in Aspen". Aspen Times . 2006-07-05. Retrieved 2006-07-05.
  4. ^ a b Texans for Public Justice
  5. ^ "Bush-Lay correspondence".
  6. ^ Fineman, Howard (2005-5-25). "Kenny Boy, Meet Brownie". Newsweek. Retrieved 2005-5-25. {{cite web}}: Check date values in: |accessdate= and |date= (help)
  7. ^ "CNN: Bush-Lay letters suggest close relationship".
  8. ^ "Ken Lay's Federal Campaign Contribution Report". NewsMeat. 2002. Retrieved 2006-5-25. {{cite web}}: Check date values in: |accessdate= (help)
  9. ^ New York Times
  10. ^ CNN.com
  11. ^ MSNBC.com
  12. ^ Lawprofessors blog
  13. ^ Wall Street Journal blog
  14. ^ Enron founder Ken Lay dies, CNN.com, July 5, 2006.
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